During the 2008 presidential campaign, Senator John McCain and Senator Hillary Clinton proposed cutting the federal gasoline

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During the 2008 presidential campaign, Senator John McCain and Senator Hillary Clinton proposed cutting the federal gasoline tax

(which is a unit tax) only during the summer months. Assume that gasoline refiners run near full capacity during the summer, so they are unable to increase supply in the short term.

Also assume that the consumers of gasoline have some ability to substitute away from gasoline

(for example, by driving fewer miles). If this proposal were implemented, how would the benefit of the tax cut be divided between consumers and suppliers of gasoline? Use a diagram to support your answer.

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Public Finance

ISBN: 9780073511351

9th Edition

Authors: Harvey Rosen, Robert Guell, Ted Gayer

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